Transcription
[Music] Hello everyone. Thank you for joining us and welcome to the Mic on Hour. We are a mining consultancy that has provided independent professional advice to mining companies, providers of capital, law firms, and government agencies for over 30 years. Staffed by senior industry consultants with extensive international experience, we are here to discuss relevant topics for the benefit of our mineral industry followers. And now, here is your host, Michonne's Mineral Resource Specialist, Alan San Martin.
[Music] Hello everyone. Hi, Sam Martin here. I'm very happy to be your host in the Micron Hour podcast. This is our first episode. We are new to podcasting, and we are excited to start this way of communication, sharing our wealth of experience with you. At Michonne, we work with our clients to promote responsible mining and to integrate the principles of sustainability into their mining projects. In today's episode, we will talk about NI 43-101 technical reports: what they are and what they are not. We'll start discussing the details of this topic, and be sure to listen all the way through. And at the end, we will have about 15 minutes for questions. You have to be in the Zoom meeting to ask your questions. I'm here today with our co-host and colleague, William J. Lewis. He's a senior geologist and director of MyCom. Hello, Bill. How are you today?
Hello, Alan. I'm very well, thank you.
So, let's start with the basics of what the National Instrument 43-101, the Standards for Disclosure of Mineral Properties, what it is exactly.
Well, Alan, the standard was originally derived because of the Bre-X scandal in the 90s, and the regulators at the time didn't want this to occur again. So they basically established by law the National Instrument NI 43-101, which are the standards of disclosure for mineral projects. And along with that, they established what's called Form 43-101 F1, which is the standards for the technical report contents and instructions for the set of various sections within the report. That was to help offset or, you know, at least get common disclosure regulations for the Canadian mining industry.
Okay. And what is the purpose of an NI 43-101 technical report?
Well, the purpose of an NI 43-101 technical report is to summarize the material scientific and technical information on mineral exploration, development, and production activities of a mineral property that is material to the issuer of the or the owner of the property. And its intended audience is basically the investing public and their advisors, which in most cases are not mining experts.
Okay. So when do you need a technical report 43-101?
Well, you need an NI 43-101 for first-time disclosure if a company is getting listed on the Canadian markets, if you're doing an exploration program, if you're a junior and you're disclosing information on that program, summary of a mineral resource estimate. You could be a company that has a royalty on a property but has no other interest in the property, so you can write an NI 43-101 on your non-operating interest in a property. And then, of course, there is anything to do with the economic assessments of the projects. So, for instance, say an early preliminary economic assessment, or pre-feasibility, feasibility, and even a summary of the work conducted on an operating project, which may contain an updated resource and reserve or any variation thereof.
All right. And when you say, in your MyCom experience, when you say what they are not, can you give us an example of that?
Well, for instance, in an exploration report, they're not meant to be a dump of the data from your exploration project. So they're not meant to be a dump of all the work you've done, all the drilling you've done. They're meant to summarize that information. So say you've done 40 drill holes on a project, you summarize that information that you've obtained for those 40 drill holes. You don't want to see 40 detailed drill logs. The investor is only going to want to know what the actual results of the drilling are. They're not going to want to know the assays for every little interval, but they're definitely going to want to know what the significant assays were and how they basically lead to further work on the project.
Okay. So you're going to need, you know, basically a summary of sections and maybe a plan of that work.
Okay. So, sorry. So when you have this summarization, and there are many ways to put extensive information into a few pages or paragraphs, can you give us an example of good summarization?
Well, a good summarization basically, if you have 40 pages of your exploration program that basically details your exploration degree and contents and results that you've written at the end of your exploration program, you summarize that information into, you know, from 40 pages to maybe 10 pages. You hit the highlights. And you also, NI 43-101, because it's a rigid document that you have to have certain content as specified under NI 43-101 F1, you need to have that content in that chapter. So, for instance, you would need to have a table summarizing the drill holes and their location and their dip and their length. You don't need to have the entire. Most people nowadays, on a 300-meter drill hole, they would take certain tests every few meters or every tens of meters to do a drill hole trace. Well, you don't need to do that in the technical report. You just need to say that, you know, the collar location and it was, you know, the intent was to drill at minus 70, for instance. You don't need to go into the meter-by-meter detail of the drift of that that you get from a survey.
Conversely, in an economic assessment, where you're doing the economics, you may have done a mine schedule, you may have done a whole bunch of other studies. Well, you want to do the highlights. So, you know, your mine schedule, you have it in a table, you know, the results on a monthly basis, maybe at the start, or a quarterly basis, or a yearly basis. But you don't need to go into, you know, if you have a mine schedule for 10 years, you don't need to go into the monthly details for that 10 years. You might even go on a year and not even go into the quarterly after the second year or so.
Okay. Okay. Can any company or individual in the world, after NI 43-101 is written, under mineral property?
Yes. And the NI 43-101 is a prescribed reporting procedure with the contents of the report, and it has become somewhat of a standard in the mining world or the mining investment world to request an NI 43-101. Not only Canadian companies have them written, but all, a lot of foreign companies use them because they become sort of a known standard for raising funds or showing investors your or defining or showing your investors what you have on your property. So, yes, they can be written on any mining project in the world. But generally, for publication and that, they're a Canadian exchange requirement for Canadian companies, but any company in the world can write them.
And who can write an NI 43-101 technical report? Do they have to be independent?
Well, generally, NI 43-101s are written for junior mining companies, and in that case, they have to be independent. Yes. You know, they're written to show their investors the results of their work. So when you're a junior mining company, and what's defined in Canada as a non-producing company, they have to be independent. But when you get to larger companies, the major mining companies of the world, they don't have to be independent. They could be written by the staff of the mining company, unless it's a material change to that company. And then they would have to be independent.
And then, materiality is defined by who?
Well, materiality is generally defined by the management or the board of the company. However, the exchange has been known to step in and say they don't agree with the management or the board of the company and requested an NI 43-101. But generally, materiality is a function of the board or the management. For instance, a company may be looking to list on an exchange, and they have several mining properties. The board or the management feels one has more long-term benefits to the company, so therefore it's more beneficial, or it may be able to be brought into a higher category. You know, they may be able to do more an economic study on it earlier. They may feel that it's got more potential as a long-term mineral deposit. So, you know, if they're getting listed, they would say to the exchange, we've got these five properties, but this one is material to the company, and therefore this is the one we're going to write our NI 43-101 for listing purposes on.
And when an NI 43-101 technical report becomes invalid, like you have an expiration, or how does it work?
Well, there's no defined shelf life date. It doesn't expire after six months or a year. Generally, if you've got an economic study, like a PEA, a preliminary economic assessment, if you've published that, and six months later the markets have dramatically changed, and your commodity prices or your costs have dramatically changed, that would render an NI 43-101 invalid. Or, if you've done an exploration project and you've done the work, and then you've done an economic assessment on it, and then you go back a year or two later and do a new drilling program on it, that would probably invalidate it because you have new information that changes the underlying information that the resources or the economic assessment was done on. So there's no defined shelf life. But definitely, the exchange does sort of look at older NI 43-101s and may say to an issuer that they need to update it. Or an issuer might buy a mining project from a former company that's done a lot of work on it, and they want to issue it in their name, and the exchange may say, well, yes, you can issue it in your name, but we feel that the underlying conditions have changed, so therefore you need a new report.
The other thing that might change an NI 43-101 is the fact that you've gone out and put the project out into, say, a feasibility study, and the company is then, for economic reasons, not done anything with the project. And the company wants to do, three or four years later, wants to go back and bring the project back to market. That may invalidate it even though it's a feasibility study because the economics have changed. That's happened in a number of cases when we had the economic slump in 2012, where the markets went down. Projects that were at a feasibility study stage, but were done, companies couldn't raise money because of the markets. The feasibility study was there, but the company wanted to go back to the market three, four years later, and the market has changed, the economics have changed, commodity prices have changed, equipment prices have changed. So that would preclude doing a new report.
Okay. So I just want to go back one step, talking about the QP and the independence. Can you expand a little bit about that?
Well, you know, independence is defined under NI 43-101, and it's a QP's independence of an issuer defined such that there are no circumstances, in the opinion of a reasonable person aware of all the relevant facts in the project, that would determine that it interferes with the qualified person's judgment regarding the preparation of the report. So, you know, it's defined further as to under the companion policy, which is sort of the security regulators' interpretation of how they interpret things. So, the consultant may not, in some cases, be deemed independent of an issuer if they've derived the majority of their income from that issuer in a year. But the independence is viewed in the fact that, in the opinion of your peers and reasonable people, you could not be influenced by the company, or your judgment wouldn't be influenced by the company.
Okay. Okay. So to wrap up the conversation about what it is and what it's not, what are your final comments, Bill?
Well, my final comments are that if you're looking at an NI 43-101, you have to realize these are summaries, and they are not a feasibility study. A feasibility study has multiple reports or volumes. Some may be the baseline environmental study, some may be the volume on mining and all the details in the schedule of the equipment being used and the fuel consumption and everything else, or they might be a volume dealing with the processing plant and all the plans and construction diagrams related to that. So they're not a feasibility study; they're a summary of a feasibility study of the relevant information. And they're not the entire data of an exploration program with all the details of the QA/QC, the details of the individual drill holes. They're a summary of that. So, but they, you know, so they're not the final. The company has not given you the feasibility study; they've given you a summary of it.
Okay. Okay. Okay. So I think we are open for questions if the people that have joined us on Zoom can raise their hand, and you can be able to ask questions to Bill.
All right. We have one person, Sabanicam. Good presentation. I think I'm not clear. Maybe you said the junior mining companies or the exploration companies, actually non-producing ones, they need the NI 43-101 to be written by an independent QP. Is that correct what you said?
Yes. Under Canadian regulations, a junior company, or even a slightly better than junior company, has to have a report written by disclosing material information by an independent QP. So the issuing producer term is actually a defined term. So if I remember correctly, an issuing producer has to have a gross income of 30 or 90 million dollars over three years, or 30 million dollars a year for three years. But it is once you become an issuing producer, then you don't necessarily have to have a report written by an independent QP, unless, again, it triggers a material change to the company. So, for instance, if a company had one mine operating, they were an independent issuer, but they decided to go out and buy another company that had another mine, so suddenly their revenue or their output was going to be dramatically changed, that's material. So they would have to have an independent report done.
You know, if there is the possibility that, you know, again, an issuing producer, again with one mine, did a huge drilling program, identified a second zone on the property, increased its resources by a material amount of 50% or better, then that would be material to the company because it would change the life of the mine. So that would probably have to be, in the eyes of the exchange, written by an independent QP. But if you're an operating, producing issuer and you have a mine and you have a 5% change in your resources, that probably can be written by an internal QP. But generally, independent reports for junior mining companies, because they're raising money for exploration, for economic studies, generally those all have to be written by independent QPs.
I think they are. The only question I would like to make, or suggestions, is the first-time report. If the junior is entering the market for the first time, and the enabler to own on success, that which has to be independent. These consecutive ones do not have to be.
That's not necessarily correct. Because if you're having material changes, yes. So if you do a first-time report on your property, for instance, and you're just acquiring it and you're getting listed, yes, you'll need an independent report. But if you then go and do exploration, you'll need to do an independent report. If you're doing a second exploration program, you might. Most of my experience has been that the junior will get an independent report. If you're doing a first-time resource estimate, you'll get an independent report. The exchange may question why if you're not an issuing producer, and that's the key. And you do a resource estimate, for example, it's your first-time resource estimate. You put it out with an independent company or an independent QP. And then you go and do more exploration, you still are not an issuing producer, and you do an update to that resource estimate. The exchange will question and may demand that it be independent.
They are. Sorry to disagree with you, I apologize. But I think it is substantially material by material. There is something in the clause 43-101, something I think in the 43-101, it says it's like, you know, you're doing an independent report, then you went for exploration, hypothetical speaking, then you added like another 100% result, and like substantially high, then it's subject to, you know, I think, you know, it's a questionable kind of reporting. So, you know, these stock exchanges may come after you. But the 5%, 10%, I don't think that is an issue.
Actually, I would disagree with you on that one. Yes, if it's a 100% increase, it's definitely has to be independent. If it's a substantial increase, 50-60%, yes. But I had a case of an issuing producer a number of years ago where Micon put an NI 43-101 out in November on the production of the mine and the new resources and reserve estimates for that mine. The company then went and did an internal resource estimate as of the end of December. They went and issued a press release saying, here's our report, but as of the end of December, we've got these resources and reserves. And nothing happened in the market. There was no huge increase in the share price. There was no blip of any type. And the president of the company called me at the beginning of September in a panic because he had just received a letter from the exchange saying that basically, within 10 days, if he didn't get back to them and answer why they didn't issue an NI 43-101 for their December 31st resource and reserve estimate, they were going to be stopped traded.
And in that case, they contacted me. In that case, they were actually successful in going back to the exchange and saying to the exchange that they didn't need one. The reason they were successful was they were an issuing producer, not a junior. The other thing is they had, I think, if I remember right, it was a 5% increase in their measured and maybe indicated, and a 35% increase in their inferred. And while you can't do it, you know, you're an operating mine, you're not doing economics on your inferred material. And I would argue, having come from them, working in an operating mine, that 5% measured and indicated, even if they were to be converted to proven and probable, don't materially change your mine life. So they were able to successfully argue that. But a big reason was they were an issuing producer already.
You know, a lot of times the problem is that the exchange will see it one way, even if management doesn't. And at the end of the day, you really, unless you've got a really good case, you can't argue with the exchange. So the exchange, even if you have a 20% increase in resources or reserves, let's call it resources, if they're measured and indicated, the exchange can come back and say it's material and then needs an independent report. So, you know, you may write a report, you may not write a report because you may say, well, it's not really material, I don't need a report, but the exchange may come back and say it's, in their consideration, it's material.
Yeah. So, Bill, let's give a chance to Alan Burton, please go ahead.
Yeah, hi Bill and Alan. It's, I guess it's been 10 or 12 years since I saw either you or spoke to either you. Hey, I've got a question with respect to assays and doing the standards and procedures and reproducibility stats on assays. Are you telling, I think you said you really don't need to put all that in? Maybe you're because it's just it's it's I'm just saying how am I going to do this? You don't need to add that in because that was already done by the company. But you probably want to have a statement in there saying that it was done and it was done correctly and you've reviewed it that way. You take all that crap out of a 43-101. QA/QC is important. I guess what I would say is that you don't necessarily need to have pages and pages of graphs summarizing or defining what your results are. A lot of times you need to go to your QA/QC and you should have the main minerals and you may have a chart that shows what your QA/QC results were. You don't need to, for instance, if you have five standards, I don't think you need to put in a graph for each standard. You need to say what the results of the standards are and maybe tabulate the results or summarize the tabulation. But I don't think a report with 40 pages of QA/QC details is needed.
Okay. Yeah, that's what I'm saying. What about the practices, you know, lab practices and all that? Because usually there's a couple of pages of that with charts and diagrams and, you know, I'm just looking how to reduce the size, the volume of a 43-101 for, you know, it's just a company that's got a bunch of showings, they've done work on the showings, they've done everything you're supposed to do, but you know, do you really need a 150 to 200 page document when you get it down to maybe 50? That's what I'm trying to reduce things.
Well, yeah, I would say maybe you don't need 200 pages, but you might need 100 pages. You know, the problem is you have two things. One, you have to put a certain amount of information in, which is required. The other thing is, for instance, the exchanges themselves. For instance, when you're talking about assay labs, now, if you put historical information in about assay labs, so you say that historically, back in the 1990s, the Bunder Clegg was used for assays by such and such company, and then you go five years later, the next company used Acme. The one thing you will definitely get nowadays if your technical report is reviewed, you will need to specify if those assay labs were, what certifications they had.
Yeah, I think that all those older labs, you could say that they had values, but they're, you know, they weren't too standard or they weren't too whatever, and you have to use your new data that you do have. Reliability. Yes. The other mention of it, it's just like it's just like old old resources, right? You can say this is a historical resource, it's non-compliant, blah, blah, blah. Then you then you write what you really need.
Well, yes, but with historical resources, for instance, if you put in a historical resource, don't be surprised if you don't get a deficiency letter saying what were the parameters that were used. Normally, in my experience, historical resources, the person didn't record what gold prices and cutoff grades they used. But more importantly, you will be asked how it relates to the current CIM guidelines. And that could be, as you know, I had a technical report where I put in the resource estimates, the historical ones, and I got a deficiency letter that basically said, please explain how the historical resource estimate is compatible or not compatible to the current CIM definitions of standards. So you have to be, you want to be, you want to summarize the material, but you have to be careful how you summarize it.
For instance, the newest one that's come up is metallurgical test work labs. You know, even though technically in the past, the request for certification has only fallen into chapter 11. I had a case recently where in the discussion on metallurgical test work, you know, you basically say such and such lab conducted the metallurgical test work, and I got a question from the exchange of what is their certification. Now, most people, metallurgical test work is a process. Its results aren't necessarily done the same way as an assay lab would do their work. So generally, the actual process and the metallurgical test work is not certified. You know, I had to go back and when I asked my metallurgists here at Micon, they said, well, metallurgical labs aren't certified, it's a process. You know, we put stuff in and we shake it around and it comes out, and it depends on the results of how long we leave it in, what we do to it, how we grind it, whatever.
So the only way you can answer that one is most metallurgical test work labs do have an assay lab associated with them, and they are so usually certified.
Okay. We have time for one more question. If someone please raise their hand, otherwise we end the show. The LinkedIn post will be there, so you can write your questions, and Bill or someone else in Micon will get back to you on any questions you have regarding this topic.
Okay. So, thank you very much for being here with us, and we'll see you in our next episode.
Thank you for joining us today. We hope you enjoyed this episode. Please feel free to leave your comments or questions, and be sure to follow us on LinkedIn and subscribe to our newsletter so you're kept informed on future episodes.
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